Electrolux 2014 Annual Report Download - page 114

Note 18 Financial instruments
Additional and complementary information is presented in the following
notes to the Annual Report: Note , Financial risk management,
describes the Group’s risk policies in general and regarding the princi-
pal financial instruments of Electrolux in more detail. Note , Trade
receivables, describes the trade receivables and related credit risks.
The information in this note highlights and describes the principal
financial instruments of the Group regarding specific major terms and
conditions when applicable, and the exposure to risk and the fair values
at year-end.
The Group classifies its financial assets in the following categories:
• Financial assets at fair value through profit or loss
• Loans and receivables
• Available-for-sale financial assets
The classification depends on the purpose for which the investments
were acquired. Management determines the classification of its invest-
ments at initial recognition.
Derivatives are initially recognized at fair value on the date a deriva-
tive contract is entered into and are subsequently measured at their fair
value. The method of recognizing the resulting gain or loss depends on
whether the derivative is designated as a hedging instrument, and if so,
the nature of the item being hedged.
The Group designates certain derivatives as either hedges of the fair
value of recognized assets or liabilities or a firm commitment (fair value
hedges); hedges of highly probable forecast transactions (cash flow
hedges); or hedges of net investments in foreign operations.
Movements on the hedging reserve are shown in other comprehen-
sive income in the consolidated income statement.
Net borrowings
At year-end , the Group’s net borrowings amounted to SEK ,m
(,). The table below presents how the Group calculates net borrow-
ings and what they consist of.
Net borrowings
December ,
 
Short-term loans , ,
Short-term part of long-term loans  ,
Trade receivables with recourse  
Short-term borrowings , ,
Derivatives  
Accrued interest expenses and prepaid interest
income  
Total short-term borrowings , ,
Long-term borrowings , ,
Total borrowings , ,
Cash and cash equivalents , ,
Short-term investments  
Derivatives  
Prepaid interest expenses and accrued interest
income  
Liquid funds , ,
Financial net debt , ,
Net provision for post-employment benefits , ,
Net debt , ,
Revolving credit facility (EUR m, SEK ,m)) , ,
Committed bridge facility (USD ,m) — ,
) The facilities are not included in net borrowings, but can, however, be used for short-term
and long-term funding.
Liquid funds
Liquid funds as defined by the Group consist of cash and cash equiva-
lents, short-term investments, derivatives and prepaid interest expenses
and accrued interest income. Cash and cash equivalents consist of cash
on hand, bank deposits and other short-term highly liquid investments
with a maturity of  months or less. The table below presents the key
data of liquid funds. The carrying amount of liquid funds is approximately
equal to fair value.
Liquidity profile
December ,
 
Cash and cash equivalents , ,
Short-term investments  
Derivatives  
Prepaid interest expenses and accrued interest
income  
Liquid funds , ,
% of annualized net sales) . .
Net liquidity , ,
Fixed interest term, days  
Effective yield, % (average per annum) . .
) Liquid funds plus unused revolving credit facilities of EUR m and SEK ,m divided
by annualized net sales.
For , liquid funds, including unused revolving credit facilities of
EUR m and SEK ,m, amounted to ,% (.) of annualized net
sales. The net liquidity is calculated by deducting short-term borrowings
from liquid funds.
Interest-bearing liabilities
Borrowings are initially recognized at fair value net of transaction costs
incurred. After initial recognition, borrowings are valued at amortized
cost using the effective interest method.
In , SEK ,m of long-term borrowings matured or were amor-
tized. These maturities were refinanced with SEK ,m.
At year-end , the Group’s total interest-bearing liabilities
amounted to SEK ,m (,), of which SEK ,m (,)
referred to long-term borrowings including maturities within  months.
Long-term borrowings with maturities within  months amounted to
SEK ,m (). The outstanding long-term borrowings have mainly
been made under the European Medium-Term Note Program and via
bilateral loans. The majority of total long-term borrowings, SEK ,m
(,), is taken up at the parent company level. Electrolux also has an
unused committed multicurrency revolving credit facility of SEK ,m
maturing , as well as an unused committed multicurrency revolving
credit facility of EUR m maturing . These two facilities can be
used as either long-term or short-term back-up facilities. However,
Electrolux expects to meet any future requirements for short-term bor-
rowings through bi lateral bank facilities and capital-market programs
such as commercial paper programs. Electrolux has also a committed
bridge facility of USD ,m to fund the planned acquisition of GE
Appliances at closing. The bridge facility is planned to gradually be
replaced by capital markets and bank financing, and a rights issue. The
paid fees for the bridge facility during , to a cost of SEK m, have
been capitalized and booked as prepaid expenses.
At year-end , the average interest-fixing period for long-term
borrowings was . years (.). The calculation of the average inter-
est-fixing period includes the effect of interest-rate swaps used to man-
age the interest-rate risk of the debt portfolio. The average interest rate
for the total borrowings was .% (.) at year end.
The fair value of the interest-bearing borrowings was SEK ,m.
The fair value including swap transactions used to manage the interest
fixing was approximately SEK ,m. The borrowings and the inter-
est-rate swaps are valued marked-to-market in order to calculate the
fair value.

 ELECTROLUX ANNUAL REPORT 
All amounts in SEKm unless otherwise stated